520. Do you believe there should be a civil
service Act? Should there be legislation?
(Will Hutton) I have come round to it.

521. Which way?
(Will Hutton) I am in favour of a civil service Act.
There is a growing discussion in Europe about telecom, postal
servicestraditional areas that have been universally provided
by the State that have either been liberalised or privatised.
There is even a very urgent debate going on in Europe about what
public service means. It seems to me that there is something about
accountability and universality and some of the things which Sir
David has been saying which actually, in that nexus, defines it.
Lionel Jospin, the Prime Minister of France, actually made a very
interesting speech in May in which he, amongst other things, said
that there should be an EU declaration about what constitutes
exactly the object of this inquiry, that there should be an EU
declaration about what constitutes public service and what constitutes
a public service ethic. It could then be used as a benchmark by
everybody from the private sector who engages in public sector
activity, it could be used to ensure that actually what they do
corresponds to that ethic and that when you write a contract it
is there. I think a civil service Act in a sense would allow us
to bring home and customise for Britain such an idea. We do have
a State, it will have a secretariat, that secretariat will be
the civil service, and it seems to me that one of the good points
about having a civil service Act is that you could in a declaratory
wayI do not think it has to be a long Actstate precisely
what we think a public sector ethic is. That itself would be an
important reason for having such an Act.

522. Do you thinkand I am pleased to
see you have come round to it, because otherwise it would knacker
the second part of my question!that you would be able to
cover enough of the public sector within the Act (thinking of
teachers, nurses, etcetera) to be able to make it so that it is
not so draconian that they do not feel they can operate and that
they are too accountable to MPs or whoever, and so that they are
actually not feeling that it is too oppressively controlled? Is
that not going to be a problem? You may kill the ethos because
you are actually making them so stringently controlled by an Act
of Parliament that it would actually do the opposite of what it
was meant to do? Do you see that as a problem?
(Will Hutton) I think the problem is the other way,
actually. I think that a lot of public sector staff are really
very demoralised. In my current job I have found myself talking
to CEOs in both the private sector and Permanent Secretaries in
the public sector who kind of double-up as CEOs, and it is actually
people in the public sector asking their private sector counterparts
how they would re-moralise their demoralised staff and re-motivate
them and what could be done. I think to be able to say, "If
you buy into a career in the public sector it stands for certain
values," far from being oppressive would be curiously liberating
because, once you had got that said, you could then do things
like introduce performance-related pay, internal labour markets,
the kinds of leadership programmes and accent on management systems
that I think is needed in the public sector, without anyone saying
that it contravenes the public sector ethic, because you have
protected it by the Act.

523. The Industrial Society says "everything
we do is driven by a commitment to improve working life."
(Will Hutton) Yes.

524. You see yourself as acting as a liaison,
a direction, a beacon to be able to help public sector workers
to see that "Public sector ethos is that, but you could do
this to move it on."
(Will Hutton) Yes.

525. Is that what you are basically saying?
(Will Hutton) Yes. We have actually been, together
with the Cabinet Office, holding a number of seminars and brainstorming
sessions, which we are going to carry forward next year, trying
to get at and explore what the improvements might be in the things
I have described, precisely to achieve that purpose and to improve
the quality of working life in the public sector.

Mr Lyons

526. On the question of private prisons, are
these all new throughout the UK or are they old prisons which
have been modernised?
(Sir David Ramsbotham) Do you mean structurally?

527. Yes.
(Sir David Ramsbotham) The first ones were actually
the private sector taking over and running the prisons that had
been built by the prison service. Most recently the private sector
has been contracted to design and build buildings which in fact
the prison service lease for a period of time, at the end of which
they will revert to them. This is interesting because the private
sectorand it applies to a number of other activitieshas
used its initiative and gone out and gone to the best designs
there are on the market, and they are much better for running,
they are much better for prisoners and staff, and much more modern,
much more up-to-date. It is interesting though that the private
sector is still perfectly willing to take over and compete for
an old Victorian prison and try and make something out of that
because they believe that the stones are not all; it is the attitude
of staff and the programmes for prisoners within them which really
count.

528. You must still come up against problems
like slopping out in some of the gaols that you mention.
(Sir David Ramsbotham) That has gone. There are one
or two isolated incidents but basically that has gone. I do not
say that I am happy with the situation of people living where
the lavatories are not screened and so on, but slopping out has
ended.

529. Are there figures available of how much
it would cost to run a private prison? Is there an ability to
scrutinise the figures?
(Sir David Ramsbotham) Yes, and various cost comparisons
have been done. People like PriceWaterhouse and Coopers Lybrand
have produced analysis. They are quite difficult to be precise
about because you have got to compare like with like in the role
of the prison. I counselled against this. I can look at it as
Chief Inspector of two prisons which have the same role in the
same part of the country (for example, Altcourse and Liverpool,
which us making the better job of looking after its prisoners?)
but I cannot judge about the money side. That is up to them. But
the costs are known. But then there is a lot of discussion about
costs because, in the new ones which the prisons are leasing,
they are actually paying a mortgage on top of the cost of the
prisoner. You have got to get two costs, reallythe costs
which are related to the prisoner and the costs which are related
to the mortgage or the leasingand separate them. The other
thing is that there is a lot of discussion in the private sector
companies that when competing for contracts they are not now competing
on a level playing field, because the prison service writes off,
if you like, the administrative overheads and the private sector
have to add the overheads when they add up the cost of the whole
exercise. That gives them a sort of unfair advantage when the
respective contracts are being considered. This I know is being
looked at currently by the National Audit Office because of complaints
that have been made.
(Will Hutton) I just wanted to make a 30-second remark
about the private finance initiative in the context of this. I
think it is important for the Committee to consider it. There
are a couple of PFI contracts, particularly in building prisons,
which, because of the ability to refinance them at very substantially
lower interest rates, threw up enormous windfalls. I think this
is an area where you really get to this public interest question
very fast. Those windfalls fell beyond the contract. No-one is
ever able to write a contract to specify every eventuality and
when it fell outside the contract, there was not a public spirited,
"Let's share this money out." The companies, not unreasonably,
because of their responsibilities to their shareholders, said,
"That windfall is ours." In subsequent contracts that
has been dealt with but my point isand one has to be wary
about contracts and writing contractsthat nobody can foresee
when you write a contract all the outcomes and unanticipated things
that are going to happen in the future. It is enormously important
because of that actually, if we are going to get into the business
of public/private partnerships and PFIs, that we have structures
which embody the public interest, which is why I am a strong advocate
of public interest companies. That, in a sense, overlaps with
what Sir David was just saying.

530. The service level agreements which you
referred to earlier on, who actually ensures that someone is delivering
the level of service. How is that done?
(Sir David Ramsbotham) As far as the private sector
is concerned, the contracts are let by a part of the prison service
Headquarters, which is the contracts group who let them, and the
controllers who work inside each of the private sector prisons
report to that office. They monitor a whole lot of targets that
they have to watch, and they are huge. Some of them I complained
about as being silly. For example, a private sector prison would
be fined if they found drugs in the prison on the grounds that
they should not have been in there in the first place. I said,
"Well, steady, because if that is going to happen people
will not look for them in case they get fined for finding them.
So be sensible. What are you going to do about the public sector
prisons where you find drugs?" and so on. So some of them
are silly, some of them are sensible. Other than making certain
that you actually acknowledge that you will give them three meals
a day and what the meals consist of (so that you are not fiddling
the catering fund, for example), all the contract points should
be about outcomes for prisoners. Those are the ones you have really
got to test. The public sector have sort of business agreements
and they were going to have gone down the route of converting
those to service level agreements as well (where, for instance,
Parkhurst would have been told that it was responsible for looking
after so many people, it had to deliver so many hours of education
and all the rest of it), but they have not done that. They have
sort of fudged a half-way solutionwhich I think is a pity
because it means that you have in fact got two separate management
systems running in the same organisation, one to manage the private
sector and one to manage the public sector, and I think that is
unsound. I would argue that the public sector is the one where
performance needs to be driven up. It can be driven up by the
example of how they have managed the private sector.

531. Can I come back to a point you made earlier,
this question about management responsibility, leadership and
so on. It always was an issue for me in the public sector that
we were dependentand in the private sectoron the
person heading up the organisation. If he or she is useless, then
the place will go down and the whole public sector will be lost
and it will be privatised. Is there any way we can avoid poor
leadership and poor organisation? How can we improve it?
(Will Hutton) This is the heart of it, in my view.
The first point is that there is always going to be a degree about
two areas of the public sector. One is this leadership question
because who leads a department of State? The Minister or the Permanent
Secretary? The Secretary of State or the . . .? You really needin
just the way any private organisation requires complete alignment
between the chairman and the chief executive around strategycomplete
alignment between the Secretary of State and the Permanent Secretary
and between Ministers of State and department heads, it seems
to me. There is absolutely no culture of producing that or thinking
about it. I think this question of how you lead and manage an
organisation is not one which in a sense is part of the induction
process or thinking of people who go into politics, but, if you
are going to achieve things as Secretary of State, how you run
and manage a department is actually fundamental. That is one thing.
A second difficulty of course is that the public sector has to
do things for every citizen because it has to have mechanisms
of accountability in there and transparency and open-book accounting.
Definitionally what it does is going to be per unit of things
it does and at marginally more expensive than the private sector
doing it. So you have to pay for accountability. We often do not
accept that. I think that the precondition to getting successful
leadership in the public sector is a recognition by everybody
in the political class that actually how departments of State
are led when they have become Ministers and Secretaries of State
is actually fundamental to their success as politicians. I do
not believe that is in the culture, I really do not. Then there
is maybe a question about what that means for how we structure
the civil service and perhapsand here you get into a very
interesting debateto what extent is the notion of an impartial
Permanent Secretary a reasonable one. If you are going to align
with a Secretary of State from whichever political party commands
a majority in the House of Commons, plainly you are going to take
a political position. Maybe we need to build round our Secretaries
of States and our Cabinet Members and our Ministers small teams
of managers and leaders who are actually politically aligned with
what they do: overtly accept that this is going to be political,
rather than pretend that it is impartial and through the pretence
of impartiality just get no leadership actually embedded into
the organisation. I think all three political parties would probably
accept that, so there is a constitutional question raised. Then
actually there is the whole question about leadership. We do it
in the Industrial Society and there are a number of places in
the UK which attempt it, to talk, teach, discuss, debate what
the initiative is about. Leading and how you lead in some respects
requires professional skills. These skills can be acquired and
learned. Actually, only now, the NHS have just introduced a leadership
school. It is literally about eight or nine weeks old. If you
talk to the civil service Permanent Secretaries, they are increasingly
used in this whole question, but we are really just beginning.

Brian White

532. Following on from that, this discussion
that we are having about public sector ethos, is that not part
of the obsession that Britain has had with ownership rather than
liberalisation? What we ought to be talking about is methods of
management, methods of public accountability and how you liberalise
the system, rather than this obsession with who owns what just
as a way of getting round the public sector borrowing requirement.
(Will Hutton) I would actually slightly turn that
question on its head. I think that ownership does matter but I
also think that leadership, management and efficiency matters.
I think sometimes you do have to own things to prosecute what
you want. I would argue that one of the difficulties, for examplehere
is Railtrack. I think this public interest company that has been
set up to run the rail system with the failure of Railtrack is
quite an interesting development, but it needs to own the assets
in order to manage them and integrate them. It is obvious that
that has become a really self-evident truth about the rail system.
What has tended to happen in the past, if you go back to the kind
of socialist tradition in Britain, is that it has almost said:
"Once the assets are owned, all falls out." But once
the assets are owned is actually just the beginning. There has
been a massive let down in the way I think public assets were
managed really post-nationalisation. I do not think that we set
up financing mechanisms, incentive structuresand I have
said it all before, so I will not repeat it. I would not say that
because I have become so interested, partly through my new job
at the Industrial Society, in these organisational questions,
that it just means that ownership questions become unimportantyou
know, I would not throw the baby out with the bathwater.

533. Sir David, you give a very clear accountability,
one to one, but is reality not that a lot of organisations and
partnerships have a lot of different stakeholders, whether it
be the private sector or whether it be central or local government
or whatever. How do you achieve that clear accountability and
responsibility you were talking about when you have a multiplicity
of interested parties?
(Sir David Ramsbotham) You see I would argue, let
us get to the bottom of that, let us go to the prison. A prison
is not just a single entity, inside the prison there are a whole
lot of separate activities, there is the custodial bit, the health
care bit, the education bit, the provision of the work bit, the
rehabilitation bit, and so on. All of those people are stakeholders
and they are all accountable to the person in charge for a particular
part of the operation. I believe that is the principle that should
apply. Certainly in prisons, to my mind, the principle person
who is accountable and responsible for all this is the Home Secretary,
after all he is accountable to Parliament and the public for what
goes on in prisons.

534. The education is the responsibility of
the Secretary of State for Education.
(Sir David Ramsbotham) Let us take education, what
happens with education is that every prison lets an educational
contract to a provider. The provider is accountable for the way
it is delivered. In addition to the actual delivery within the
prison, that is monitored by an agreement which I came to with
Chris Woodhead when he was Chief Inspector of schools, who happened
to let me know one day that he had 100 days of prison inspections
in his budget and he did not know how to use it. I said, "I
can tell you how to use it, you give me 100 days of your inspectors
and I will go and look at the way education is delivered in prison
in the same way as you look at it in schools, so we have the same
judgements, and the report on the delivery of education goes both
to the Home Office and the Department of Education. The same things
happens with health, working very closely with the Department
of Health and the Royal Colleges the inspection of medical arrangements
in prison goes to both parties. The Home Secretary is responsible
overall for what goes on but the Department of Health is a subcontractor,
if you like, in this process. What has always struck me is, I
am very interested by what Will Hutton says about this, I do not
think you can forget the history of prisons, that until 1962,
from 1877, they were in effect a next steps agency run by the
Prison Commission and the Prison Commission had a staff of 168
people and they ran all of the prisons in a functional way. In
1962 the then Permanent Secretary went to the Home Secretary and
said the biggest part of the Home Office budget is prisons and
he thought they ought to be made a department of the Home Office
and run by career civil servants, and that is what happened and
they remained a department of the Home Office until Derek Lewis
was appointed by Kenneth Clarke to break the mould, during which
time the headquarters has gone up to a strength of 2,000 and there
are as many governor grades in Prison Service headquarters as
there are prisons. The bureaucracy has increased and whatever
else civil servants are in the way they serve ministers they are
not capable of running operational organisations. I believe that
this is where Will Hutton's point about leadership and management
is so important. Civil servants make excellent servants to their
ministers but they do not make the right people to run these organisations.

535. How do you change to get them to do that?
(Sir David Ramsbotham) I would make them an operational
organisation. I would select and train the people in the Prison
Service in a completely different way so that you had a pool of
people from whom to choose to be the professional head of the
service, who got there through a career which was properly managed.
I am not in any way criticising Martin Narey, because he has been
appointed and he was the best they could get. In military terms
Martin Narey's last appointment in the Prison Service was the
equivalent of a captain in the Army and he then appears as a general
without doing anything in the middle. He had no intermediate managerial
experience. I do not think it is fair to put someone in charge
of an operation like that who has had no managerial experience
on the way, because he does not know how to do it. Then when he
comes under the sort of pressure, you must conform with budgets,
you must conform with this, you know, he has not got the background
to enable him to make the sort of point that Will Hutton is making
as being so important to develop a properly structured, motivated
public service.

536. Can I just turn it round, if you are trying
to affect change within the public services and you have had these
external regulators, whether it is yourself, OFSTED or the NAO
sitting there, and you are a public servant you are not going
to take the risk, you do not want to be up in front of the National
Audit Office, you do not want to be in front of the Public Accounts
Committee. You are quite happy to be in the middle, you are not
going to be in the top or the bottom, is that not part of the
problem, we have too many targets and too many inspectors and
people playing it safe?
(Sir David Ramsbotham) I think there is a great deal
in that. My regret during my time there is I never felt I was
actually totally clear as to what aim ministers had for the prisons
that I was looking at. I was quite clear from the Act of Parliament
as to what I ought to be looking for. The danger of that is that
there then becomes confusion in the mind of the practitioner,
they did not want what I was seeing when I was talking about prisoners
and, as I mentioned to the governor of Parkhurst, they were under
a different heading. What I believe, and I said this to the Home
Secretary, was that the role of my inspectorate was actually his
quality assurance. That is what I was there for. The fact there
is an independent objective quality assurance mechanism is, I
think, very important for maintaining the standards in the service.
I was not a regulator. I was not "Ofnick", and I think
that was a good thing! You can only have, I believe, one direction
and one regulation, and that means that you do need this clear
direction to which everyone can relate. One of the problems is
there is not that clear direction to which everyone can relate.
(Will Hutton) There are some very interesting ideas
in the public sector and there are some interesting champions
of change. One of the outcomes of the seminar series and brainstorming
sessions we have had was almost a universal view that the "at
risk" order issue is wrong, you do not take risks and you
do not venture into anything, you play it safe. You need to be
prudent before you try it. That is enormously cramming. I do think
there is, amongst the emerging bodies and permanent secretaries,
a new interest in these matters. You just have to have changed
champions, they have to be led from the top. There has to be a
kind of political consensus around the necessity for what they
are doing, and beyond that there has to be national public conversation
in which you start to redefine the issue in a way that we have
been trying to redefine them this morning.

Mr Prentice

537. On that very point, my question is to Sir
David, you are pretty disillusioned with the Home Office, are
you not?
(Sir David Ramsbotham) I am not disillusioned with
the Home Office as it exists today, because one of the channels
of change is the new Permanent Secretary is there, John Gieve,
for whom I have immense regard, and I have to say that I was enormously
taken by David Blunkett's approach when he took office, I felt
that he was going to push on with the things that needed pushing
on with.

538. I only ask the question because you tell
us that no official or politician in the Home Office acknowledged
your annual report, save on one occasion.
(Sir David Ramsbotham) That was David Blunkett.

539. He acknowledged it.
(Sir David Ramsbotham) He acknowledged it. Nobody
until then. All of the points that I made to you this morning
are actually in my annual reports, they are not new.